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INTRODUCTION
This book is not a treatise on economics. It is a collection of essays on the moral aspects of capitalism.
Our approach can best be summarized by my statement in the first issue of The Objectivist Newsletter (January 1962):
“Objectivism is a philosophical movement; since politics is a branch of philosophy, Objectivism advocates certain political principles—specifically, those of laissez-faire capitalism—as the consequence and the ultimate practical application of its fundamental philosophical principles. It does not regard politics as a separate or primary goal, that is: as a goal that can be achieved without a wider ideological context.
“Politics is based on three other philosophical disciplines: metaphysics, epistemology and ethics—on a theory of man’s nature and of man’s relationship to existence.

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Observe that in World War II, both Germany and Russia seized and dismantled entire factories in conquered countries, to ship them home—while the freest of the mixed economies, the semi-capitalistic United States, sent billions worth of lend-lease equipment, including entire factories, to its allies.6
Germany and Russia needed war; the United States did not and gained nothing. (In fact, the United States lost, economically, even though it won the war: it was left with an enormous national debt, augmented by the grotesquely futile policy of supporting former allies and enemies to this day.) Yet it is capitalism that today’s peace-lovers oppose and statism that they advocate—in the name of peace.
Laissez-faire capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationships. By the nature of its basic principles and interests, it is the only system fundamentally opposed to war.
Men who are free to produce have no incentive to loot; they have nothing to gain from war and a great deal to lose. Ideologically, the principle of individual rights does not permit a man to seek his own livelihood at the point of a gun, inside or outside his country.

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America’s industrial progress, in the short span of a century and a half, has acquired the character of a legend: it has never been equaled anywhere on earth, in any period of history. The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind. What reward did they receive from our culture and its intellectuals? The position of a hated, persecuted minority. The position of a scapegoat for the evils of the bureaucrats.
A system of pure, unregulated laissez-faire capitalism has never yet existed anywhere. What did exist were only so-called mixed economies, which means: a mixture, in varying degrees, of freedom and controls, of voluntary choice and government coercion, of capitalism and statism. America was the freest country on earth, but elements of statism were present in her economy from the start. These elements kept growing, under the influence of her intellectuals who were predominantly committed to the philosophy of statism.

The first of these great transitions—the period of social and economic upheaval that started with the political revolutions in America and France and the industrial revolution in England—created the first era of modern capitalism, running roughly from the British victory over Napoleon in 1815 until the First World War. This long period of relative systemic stability and rising prosperity ended with the First World War, the Russian Revolution, and finally the Great Depression in the United States. These unprecedented political and economic traumas destroyed the classical laissez-faire capitalism of the nineteenth century and created a different version of the capitalist system, embracing Franklin Roosevelt’s New Deal, Lyndon Johnson’s Great Society, and the British and European welfare states. Then, forty years after the Great Depression, another enormous economic crisis—the global inflation of the late 1960s and 1970s—inspired the free-market revolution of Margaret Thatcher and Ronald Reagan, creating a third version of capitalism, clearly distinct from the previous two.

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The changing relationship between government and private enterprise, between political and economic forces, has been the clearest feature of capitalism’s evolution from one phase to the next—first in the early nineteenth century, then in the 1930s, then in the 1970s, and again today. And after each of these evolutions, the capitalist system has emerged stronger than it was before. To understand the new politico-economic model emerging from the crisis, it helps to consider the changing relationships of governments and markets in these three previous phases.
In the classical laissez-faire capitalism that dominated the world from the early nineteenth century until 1930, politics and economics were essentially distinct spheres. The interactions of government and markets were confined to collecting taxes, mainly to pay for wars, and erecting tariff barriers, mostly to protect powerful political interests. Then, from 1932 onward, came the New Deal and the social democratic European welfare states.

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Those of us who have looked to the self-interest [of private companies to promote the capitalist system]—myself especially—are in a state of shocked disbelief.”1
Appropriately enough, the nature of this flaw was identified by Ayn Rand herself in an essay on her objectivist philosophy that had inspired Greenspan and other American conservatives for two generations: “The ideal political-economic system is laissez-faire capitalism . . . In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.”2
Most serious political philosophers, sociologists, and economic historians have long realized that the opposite is true. Any society driven purely by market incentives will fail catastrophically, in economic as well as political terms.

The end of the Apollo program is the subject of Chapter 18. Part 11 ends with a pair of my lectures on the American educational system. One documents the anti-Americanism rampant in our universities (Chapter 19); the other, the anti-conceptual methodology that is wrecking our grade schools (Chapter 20).
Part III, Politics, considers a number of political issues from the standpoint of an advocate of laissez-faire capitalism. It includes attacks on the quota system (Chapter 21), public TV (Chapter 22), antitrust legislation (Chapter 24), foreign aid (Chapter 25), and socialized medicine (Chapters 29 and 30). It also offers a practical proposal to break up the government’s monopoly in the field of education (Chapter 23); a discussion of the role of wealth in an industrial economy (Chapter 27); an identification of the cause of world hunger (Chapter 28); and an explanation of Ayn Rand’s view that a rational woman would not desire to serve as president of the United States (Chapter 26).

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Reason (the faculty which identifies and integrates the material provided by man’s senses) is man’s only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.
3. Man—every man—is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life.
4. The ideal political—economic system is laissez-faire capitalism. It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man’s rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders.

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In the popular, political usage of today, the term “liberal” is generally understood to mean an advocate of greater government control over the country’s economy, or, loosely, an advocate of socialism—while the term “conservative” is generally understood to mean an opponent of government controls, or an advocate of capitalism. But this was not the original, historical meaning of the two terms, or their use in the nineteenth century. Originally, the term “liberal” meant an advocate of individual rights, of political freedom, of laissez-faire capitalism, and an opponent of the authoritarian state—while the term “conservative” meant an advocate of the state’s authority, of tradition, of the established political order, of the status quo, and an opponent of individual rights. It has been observed many times that the term “liberal” today means the opposite of its nineteenth-century meaning. This would not have been too disastrous intellectually if the two terms had been merely reversed and had exchanged their original meanings.

He had charge of the Federal Reserve under four presidents, from Ronald Reagan, who appointed him in 1987, to the second President Bush, whom he served until his retirement in 2006, and during that time he oversaw the response to several crises, from the crash of October 1987 (during which share prices fell 20 percent in a single day) through the recession of 1991, the implosion of LTCM in 1998, and the dot-com bust of 2001. For most of this time, Greenspan’s militant advocacy of deregulation and laissez-faire capitalism seemed to be an effective intellectual underpinning of his policies. Greenspan was a close friend and disciple of Ayn Rand, the Russian-born philosopher who advocated a philosophy she called “Objectivism” (she wanted to call it “Existentialism,” but some pesky Euros had already bagged that name).* Objectivism is undergoing a vogue on the Internet at the moment, perhaps because its libertarian ideology appeals to a certain type of computer nerd.

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.* Objectivism is undergoing a vogue on the Internet at the moment, perhaps because its libertarian ideology appeals to a certain type of computer nerd. Rand’s central ideas focused on her belief that society must get out of the way of great men. Man is “a heroic being, with his own happiness as the moral purpose of his life,” and the only good society is capitalism, which Rand glossed as follows: “When I say ‘capitalism,’ I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism.”3 Today Objectivism seems a sophomoric belief system, whose main truth lies in its unexpressed but profound longing for the world to be a much simpler place than it is. Still, there’s no denying Objectivism’s impact on the world, thanks to its direct influence on the most economically powerful man alive, Alan Greenspan. His emphasis throughout all his years in office was on the belief—the mystical belief—that markets could be entirely trusted to regulate themselves.

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When they do that, the issue they’re focusing on is that of regulation. Their argument, put forcefully by Judge Richard A. Posner, is that “We are learning from [the crisis] that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails. The movement to deregulate the financial industry went too far by exaggerating the resilience—the self-healing powers—of laissez-faire capitalism.”5
The financial industry caused the crisis, but it could not have happened without the help of the governments, which spent decades committed to the idea of pure laissezfaire capitalism. What that ideology did, in practice, was essentially to allow bankers to write their own rules—or their lack of rules. There was a decades-long process of deregulation and opening up, of stripping out all measures designed to second-guess the financial world’s ability to regulate itself via “market discipline.”

The first section of this chapter presents a brief history of how capitalism evolved into the credit-based, government-directed economic system that is in place today. Once that is understood, the policy options available within this system become clearer. The rest of the chapter outlines a strategy that could avert economic breakdown by making use of the new policy tools our current economic system makes possible.
Capitalism and the Laissez-Faire Method
Laissez-faire capitalism did not survive World War I. In Europe, the belligerent nations suspended the convertibility of their currencies into gold in order to finance the war with government debt and fiat money creation. The classical gold standard was thus one of the first victims of the war.
The United States did not leave the gold standard at that time, but the U.S. economy was destabilized by Europe’s abandonment of the gold standard nevertheless.

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It is intended, however, to demonstrate that they did create economic growth, regardless of how or why they came about. In other words, the economy—and the evolution of the economic system from capitalism to creditism—have been driven by the government without being planned by the government.
It is necessary to understand how great the role of the government has been in the economy and how far removed our economic system is now from laissez-faire capitalism in order to understand the nature of this crisis and the options that are available to resolve it. Cutting government spending and allowing market forces to reestablish a market-determined equilibrium are not among those options. Reallocating government spending away from consumption and toward investment is.
Murray Rothbard (1926 to 1995), a student and friend of Ludwig von Mises and an impressive economist in his own right, believed that the Great Depression would have ended much sooner had the government not interfered and simply allowed the economy to adjust by itself.

It's the story of an architect
named Howard Roarkwho heroically resists all pressure to compromise his
vision—he even blows up a public-housing project when he finds out that
the builder has altered his design—and ultimately prevails. Rand wrote the
story to illustrate a philosophy she had come to, one that emphasized reason, individualism, and enlightened self-interest. Later she named it objectivism; today she would be called a libertarian.
Objectivism championed laissez-faire capitalism as the ideal form of
social organization; not surprisingly, Ayn Rand abhorred Soviet communism,
in which she had been schooled. She saw it as the embodiment of brutal
collectivism. And at the height of Soviet power, she held that the system
was so inherently corrupt that eventually it would collapse from within.
She and her circle called themselves the Collective, an inside joke because collectivism was the polar opposite of their belief.

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The acceptance of Smith's economics was, by then, prompting the reorganization
of commercial life in much of the "civilized" world.
Yet Smith's reputation and influence eroded as industrialization spread.
He was no hero to many who struggled during the nineteenth and twentieth
centuries against what they saw as the barbarism and injustice that accompanied laissez-faire market economies. Robert Owen, a successful British
factory owner, believed that laissez-faire capitalism by its very nature could
lead only to poverty and disease. He founded the Utopian movement, which
advocated, in Owen's phrase, "villages of cooperation." In 1826, his adherents set up New Harmony, Indiana. Ironically, strife among the residents
brought New Harmony to collapse within two years. But Owen's charisma
continued to draw large followings among those struggling to eke out a living in appalling working environments.

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To me, the degree of
willingness to take risks is, in the end, the major defining characteristic that
separates countries into the various modes of capitalism. Whether different
degrees of risk aversion stem from an ethical antipathy toward wealth accumulation or the stress of competitive battle does not affect the consequences. They are both captured in the choice of legal inhibitions imposed
on competition that dilute laissez-faire capitalism, an important purpose of
the welfare state.
But there are other, less fundamental suppressants of competitive behavior as well. Most politically prominent is the inclination of many societies to protect "national treasures" from the winds of creative destruction, or
worse, foreign ownership. That is a dangerous restraint on international
competition and another issue that differentiates one culture from another.

At times old and new mingled together, as when she wondered, if perhaps, “the rational faculty is the dominant characteristic of the better species, the Superman.” 6336
The way Rand integrated reason into her earlier ideas demonstrated her strong drive for consistency. She labored to define reason as inextricably linked to individuality, asserting, “The rational faculty is an attribute of the individual.” Men could share the result of their thinking but not the process of thought itself, she argued. And since man’s survival depended on his own thought, individuals must be left free. Rationality thus connected to laissez-faire capitalism, the only economic system that sought to maximize individual freedom.
Placing rationality at the heart of her philosophy also began to shift the grounding of Rand’s ethics. In her early work independence had been the basic criterion of value. Now she wrote, “All the actions based on, proceeding from, in accordance with man’s nature as a rational being are good. All the actions that contradict it are evil.”

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In 1956 Buckley’s National Review would offer a famously lukewarm endorsement: “We prefer Ike.”32 But now, to her dismay, most of Rand’s New York friends swallowed their reservations and climbed aboard the Eisenhower bandwagon. Twenty years of Democratic rule had made them desperate for any Republican president. This struck Rand as foolish compromise and unforgiveable inconsistency. She realized, “[T]hey were not for free enterprise, that was not an absolute in their minds in the sense of real laissez faire capitalism. I knew then that there is nothing that I can do with it and no help that I can expect from any of them.”33 After a string of disappointments, she was ready to turn her back on conservatives altogether.
It was Nathan, stepping forward into a new role of advisor, who gently nudged Rand to this conclusion. The conservatives were not really “our side,” he told Rand. “We have really nothing philosophically in common with them.”

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It was an augury of the first national political realignment since FDR’s New Deal.47
“It’s earlier than we think,” Rand told the New York Times the day after Goldwater’s loss. Advocates of capitalism had to “start from scratch” and concentrate on culture rather than practical politics.48 This was the same conclusion she had reached after the Willkie campaign—that a popular consensus on the virtues of capitalism had to be established before electoral success could be achieved. Laissez-faire capitalism belonged to the uncharted future rather than the past. The senator himself seemed to accept Rand’s explanation for his defeat, quoting her in his syndicated column.49 In The Objectivist Newsletter, her private forum, Rand openly blamed Goldwater for his loss. She was appalled that the only voters he had drawn to his banner were southern whites: “As it stands, the most grotesque, irrational and disgraceful consequence of the campaign is the fact that the only section of the country left in the position of an alleged champion of freedom, capitalism and individual rights is the agrarian, feudal, racist South.” 50 The only glimmer of hope had been Ronald Reagan’s principled and philosophical speech on behalf of Goldwater, but it had been too little, too late.

The middle class has expanded enormously, and now includes many people whose professions would once have classified them for membership in the laboring classes. In absolute terms, the rich have also gotten richer, but the gap between rich and poor seems, so far as very imperfect statistics make it possible to judge, to have been slowly closing.
Many modern liberals argue that Marx's predictions were accurate enough for laissez-faire capitalism, but that such liberal institutions as strong labor unions, minimum wage laws, and progressive income taxes prevented them from being realized.
A statement about what might have happened is difficult to refute. We can note that both the rise in general standard of living and the decreasing inequality appear to have been occurring fairly steadily, over a long period of time, in a variety of different more or less capitalist societies.

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(This effect is seen in the dramatic rise in the unemployment rate of nonwhite teenagers which consistently follows rises in the minimum wage.) In the previous chapter I argued that liberal measures tend to injure the poor, not benefit them, and to increase, not decrease, inequality. If that has been true in the past, then the increasing equality we have experienced is in spite of, not because of, such measures.
Another version of the same argument is the claim that the great depression was the true expression of laissez faire capitalism and that we were rescued from it by the abandonment of laissez faire in favor of Keynesian policies. The controversy here runs into, not merely a book, but an extensive literature; for some decades it was a central issue of debate among economists. Those who would like to see the anti-Keynesian side will find one variant of it in The Great Contraction by Friedman and Schwartz. The authors argue that the great depression was caused not by laissez faire but by government intervention in the banking industry, and that without such intervention it would not have occurred.

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Many people, reading of the long work days and low salaries of nineteenth-century England and America, consider the case against capitalism and industrialism already proven. They forget that those conditions seem intolerable to us only because we live in an enormously richer society and that our society became so productive largely through economic progress made during the nineteenth century under institutions of relatively unrestrained laissez-faire capitalism.
Under the economic conditions of the nineteenth century, no institutions, socialist, capitalist, or anarcho-capitalist, could have instantly produced what we would regard as a decent standard of living. The wealth simply was not there.
If a socialist had confiscated the income of all the capitalist millionaires and given it to the workers, he would have found the workers little better off than before.

At the heart of this economic leap-in-the-dark was a switch in economic
and political philosophy from the ‘managed capitalism’ of the post-war era to what
might be called ‘market capitalism’. Central to the new philosophy was a belief in
efficient and self-regulating markets.
In the UK from the early 1980s, the commitments of managed capitalism to full
employment, progressive taxation and inclusive welfare were dropped. Of course, the
effect of this process was not a return to the much more laissez faire capitalism of the
1920s. Even by the mid-1990s, the state retained a major role in the running of the
economy, with higher levels of public spending as a share of output than in the 1950s
and 1960s.
Nevertheless, most elements of the post-war ideological settlement—and its belief
in economic fine-tuning, greater equality and a strong state—were scaled back. State
industries were privatised, regulations swept away—especially in the City—and
corporate and top income tax rates axed.

…

In the five years to
2008, Abbey, Lloyds and RBS cut their staff levels by 39,000.185
Although shareholder value was initially shunned in those nations most wedded to a
‘social market’, notably Germany and Japan, a weaker version of the new supercapitalism spread, if gingerly, elsewhere. Parts of Asia—from Hong Kong to
Singapore—embraced the new capitalism in full. Milton Friedman once described
Hong Kong as the world’s best example of laissez faire capitalism in action. Most
richer and developing nations embarked on at least some degree of deregulation and
privatisation.
The German model has been distinguished by fewer takeovers, a greater emphasis
on investment from retained earnings and lower dividend payments. But even
Germany, the spiritual home of the social, stakeholder model, with its greater
emphasis on collective success, consensus and the long term, found itself being drawn
in the direction of the greater individualism and short-termism of the Anglo-Saxon
model.

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But the
position is serious when enterprise becomes the bubble on a whirlpool of speculation.
When the capital development of a country becomes a by-product of the activities of a
casino, the job is likely to be ill-done. The measure of success attained by Wall Street,
regarded as an institution of which the proper social purpose is to direct new
investment into the most profitable channels in terms of future yield, cannot be claimed
as one of the outstanding triumphs of laissez-faire capitalism—which is not
surprising, if I am right in thinking that the best brains of Wall Street have been in fact
directed towards a different object.’317
But Keynes also viewed the growing income gap as a key contributor to the buildup of financial instability during the 1920s. He argued that because lower income
groups consume a higher proportion of their income than the rich (in economic jargon,
they have a lower marginal propensity to consume) while the rich also have a high
propensity for speculation, excessive income inequality increases the risk of financial
instability and economic collapse.

It doesn’t mean the fairness of getting what you deserve according to what you earn, but of having your needs satisfied regardless of what you earn (and of not being free to earn too much more than others). What made America great, in their view—to the extent they grant that it ever was great—was not freedom, but the post–New Deal regulatory-welfare state. The danger they see today is the alleged breakdown of that regulatory-welfare state in the name of laissez-faire capitalism. The key to saving the American Dream, they conclude, is to move rapidly in the direction of a European social welfare state.
We have seen that every element of this narrative is false—in many cases it is wildly false, based on inexcusable errors, fallacies, and even deceptions. The inequality critics attempt to prove we are stagnating—by playing statistical games that evade the fact that as inequality has increased, so has our standard of living.

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How to Liberate Ability
We do face problems today, but they aren’t economic inequality problems—they are political inequality problems. Our equal rights as human beings aren’t being protected. If we want to save the American Dream, we need a program to secure those rights and thereby liberate human ability. In our first book, Free Market Revolution, we laid out a full program for establishing laissez-faire capitalism in America. Here are five steps that, while not erasing all of the government’s barriers to success, would go a long way toward restoring opportunity to America.
Abolish all forms of corporate welfare so that no business can gain unfair advantages. This includes bailouts, subsidies, tariffs, government-granted monopolies, and the like. Businesses should have to compete for customers on a free market.

Progressive taxation was itself part of a broader worldview sometimes described as New Deal liberalism. It had replaced a worldview that stressed a far more limited role for government in the economy.
The role of underlying worldviews is characteristic of politics in the United States and Europe, and of all countries that are governed primarily by consent rather than by force and terror. In Great Britain, for instance, laissez-faire capitalism, associated with Adam Smith’s invisible hand, prevailed for much of the nineteenth century, but after World War II it was superseded by Keynesian economics.
American politics is structured to sustain prevailing worldviews. Its characteristics of winner takes all, first past the post, single-member districts have encouraged a two-party system. Third-party candidates are often dismissed as “spoilers.”

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They are usually precipitated by economic depression or war, and by a succession of political outbursts that challenge, but do not replace, the prevailing worldview. In American politics, these outbursts often take the form of populist candidacies and movements.
These catalytic populists have defined politics in “us vs. them” terms—as struggles of the people against the establishment based on issues and demands that the latter had been sidestepping. The rise of the People’s Party was the first major salvo against the worldview of laissez-faire capitalism. Huey Long’s Share Our Wealth coincided with Franklin Roosevelt’s election in 1932 and helped drive the Roosevelt administration to develop a new politics to sustain its majority. Together, these movements established the populist framework that Bernie Sanders, who described himself both as a democratic socialist and as a progressive, would adopt during his 2016 campaign.
As liberal critics would point out during the 1950s, the People’s Party had within it strains of anti-Semitism, racism, and nativism, particularly toward the Chinese, but these were at best secondary elements.

(Rand apparently never considered that one of Roosevelt’s accomplishments may have been to stave off a Russian-style insurrection.) Still, the intrepid president was so deeply, if narrowly, hated that country-club Republicans swore he possessed every vice from Stalinism to syphilis (rumored to have been transmitted to him by the first lady, who got it “from a Negro”).
When he ran for a third term, those who believed in minimal government and laissez-faire capitalism saw totalitarianism in the making. If he were to win, Rand and others believed, there might never be another federal election. America might turn to dictatorship, a notion that was not as fanciful then as it seems now, given that Hitler and Mussolini had risen to power through popular movements and were overrunning the free nations of Europe. By the summer of 1940, Nazi Germany and the Soviet Union, allies for the moment, had already invaded France, Poland, Norway, Belgium, the Netherlands, Finland, Lithuania, Estonia, and Latvia.

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She and others formed the Associated Ex—Willkie Workers Against Willkie and wrote broadsides and letters to the editor ridiculing the luckless utilities executive and accusing him of aiding the U.S. Communist Party agenda. What the country needed now, before it was too late, she told Channing Pollock, was an organization of conservative intellectuals to frame and promote a full-fledged ideology, or moral justification, of laissez-faire capitalism—to do what Willkie had refused to do. She asked Pollock to be its leader. He agreed. The first few meetings were held in offices around town or in the O’Connors’ most recent apartment, tucked into a slightly scruffy building on East Forty-ninth Street and First Avenue, near where the United Nations headquarters later rose. She and her husband had moved there from the Upper East Side during the campaign, to save money, and the following fall they would move again, this time to a sunless ground-floor apartment on East Thirty-fifth Street near Lexington Avenue.

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Most governments have hounded geniuses to martyrdom. The sole affirmative function of the state is to safeguard individuals from one another so that they may create and work in peace.
Third, there is “and ever has been” one fountainhead of progress: the individual person in a state of political and economic freedom. This was the source of the wheel, the steam engine, the electric lightbulb, and all great music, art, and literature. Laissez-faire capitalism is the only system ever evolved to operate solely on the basis of individual human reason juxtaposed against an opportunity or a need, and as such must be thanked for 150 years of industrial creativity and material progress such as the world had never known.
Perhaps most important, capitalism, unlike Communism, doesn’t demand the impossible. It doesn’t ask people to turn themselves inside out and twist their desires into halos to serve its ends, as Communism does.

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What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by
George R. Tyler

Bush doubled down on Reaganomics, and President Barack Obama, amid a gridlocked Washington, has been stymied in efforts to change it.
We’ve been living under Reaganomics since the 1980s, a span I call the Reagan era. Please be clear that I’m referring to the entire period from 1980 until now, and not just the duration of Reagan’s presidency.
I’ll define Reaganomics in detail later in the book, but for now, this brief description will suffice. Reaganomics is a version of laissez-faire capitalism that emphasizes a minimum of regulation, especially in the financial sector; a lowering of taxes, especially on the wealthiest individuals; rapid growth in government spending, especially on national defense; and an indulgent attitude toward the business community.
The Impact of Reaganomics
Economists are critical of the overall impact of Reaganomics on productivity and family prosperity.

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As Jeremy Rifkin noted, “Although Europe was the seedbed for advancing a private property regime, there was opposition from the start,” mostly farmers and the urban working class—subsisting in such squalor that they fled the dreadful conditions of the early Industrial Revolution by the millions for opportunity offered by new lands in the Americas, Australia, South Africa, and Canada.40
Dickensian eighteenth- and nineteenth-century societies demonstrated that joint stock entities and the rising merchant bourgeois class could easily outmuscle families to seize economic sovereignty. Rising income disparities gave voice to collectivists; Jean-Jacques Rousseau, for example, who published Discourse on the Origin of Inequality in 1755, and Karl Marx, whose dense Communist Manifesto was published nearly a century later.
Mainstream critics sought to temper the increasingly evident excesses of poverty, wage suppression, and the amorality endemic with laissez-faire capitalism, as popularized by Charles Dickens and others, and later, by American writers such as Upton Sinclair and John Steinbeck. It was a battle first waged in England, featuring the Chartist laborers’ uprisings in 1838–1848 promising class warfare.41 Forced by public opinion to acknowledge the validity of long-suppressed employee grievances, Parliament launched study commissions and soon crafted a middle ground between conservatives like Thomas Carlyle and socialists like John Stuart Mill that became a continent-wide template.

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And they planned for a rebirth of family capitalism even as World War II raged, drawing inspiration from Franklin Roosevelt. His January 1944 fireside chat encapsulated the wisdom that human fulfillment has an inescapable economic component: “True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.”55 Drawing on Adam Smith, their alternative was to remediate the flaws of laissez-faire capitalism with careful regulation, creating a twentieth-century grand bargain, with government maintaining prudent regulations on commerce and labor markets and expanding the safety net with retirement and unemployment support.
As explained by his biographer, Robert Skidelsky, Keynes supported regulation to “redress the failings of society not because he loved it, but because he saw it, in the last resort, as the savior of capitalism from the temptations of collectivism or worse.”56, 57 In clarifying a capitalism that sanctified family prosperity, Keynes and others fended off the Bolsheviks and provided the intellectual heft and insights vital to victory later during the Cold War.

UTOPIANISM
Intellectuals deal mainly in abstract ideas, including ideas about how to reconstruct entire societies to their liking. As such, they are predominantly utopians. Laissez-faire capitalism has little or no role in utopian planning, for such a system calls for no central planning authority (which the advising intellectual class should guide, of course). Under pure capitalism individuals constantly plan, but they do so voluntarily and in a way that best serves their own interests, as they see them, which are not necessarily the same as the would-be government planners’ interests. This is another reason why the intellectual class is predominantly socialistic: under a regime of economic freedom and laissez-faire capitalism there is no role for intellectuals to advise to the state on how to best plan everyone else’s affairs.
In the field of economics this utopianism has manifested itself in what Hayek described as “the contrast between an existing state of affairs and that one ideal of a possible future society which the socialists alone held up before the public.”6 For many years, economics students were taught that a genuinely competitive capitalist economy was one in which: (1) all businesses in an industry produced the exact same physical product; (2) every business charged exactly the same price; (3) consumers had “perfect information” (that is, were omniscient) about all available products; (4) businesses also had “perfect information” about how to manufacture their products at the minimum cost; and (5) it was cost-free to enter into or exit any industry.

While they were making some headway, a large part of Western society was rejecting that knowledge in favor of an empirically inad-equate yet powerful ideological system. Even at the time, some recognized this system as a quasi-religious faith, hence the label market fundamentalism.
38
M a r k e t F a i l u r e
Market fundamentalism—and its various strands and
interpretations known as free market fundamentalism, neoliberalism, laissez-faire economics, and laissez-faire capitalism—was a two-pronged ideological system. The first prong held that societal needs were served most efficiently in a free market economic system. Guided by the
“invisible hand” of the marketplace, individuals would freely respond to each other’s needs, establishing a net balance between solutions (“supply”) and needs (“demand”).
The second prong of the philosophy maintained that free markets were not merely a good or even the best manner of satisfying material wants: they were the only manner of doing so that did not threaten personal freedom.

However, given their quasi-sovereign powers, they are more properly understood as extensions of the sovereign with private owners and managers. This arrangement bears comparison to regional Federal Reserve Banks in the United States, which are privately owned but act as a financial arm of the government.
It was only in the late eighteenth century, with the industrial revolution and the publication of The Wealth of Nations by Adam Smith, that a more modern form of laissez-faire capitalism with private ownership and banking arose. Yet through the twentieth century, despite the success of private enterprise, state-controlled businesses still prevailed in societies dominated by communists, fascists, oligarchs and many other antidemocratic forces.
What we today take for granted as the dominant financial paradigm of private capitalist free enterprise and entrepreneurship is, in fact, exceptional in most times and most places.

…

The creation of the Nobel Memorial Prize in Economic Sciences in 1969, seventy-four years after the original Nobel Prize in physics, confirmed this academic metamorphosis. Economists were the new high priests of a large part of human activity—wealth creation, jobs, savings and investment—and came well equipped with the equations, models and computers needed to perform their priestly functions.
There has never been a time since the rise of laissez-faire capitalism when economic systems were entirely free of turmoil. Bubbles, panics, crashes and depressions have come and gone with the regularity of floods and hurricanes. This is not surprising, because the underlying dynamics of economics, rooted in human nature, are always at work. Yet the new scientific economics promised better. Economists promised that through fine tuning fiscal and monetary policy, rebalancing terms of trade and spreading risk through derivatives, market fluctuations would be smoothed and the arc of growth extended beyond what had been possible in the past.

This sudden collapse in the value of almost everything can trigger widespread bank failures, corporate bankruptcies, and mass unemployment.
The 1920s were a period of significant deregulation, as Republican administrations dismantled the system of state control developed in order to fight the First World War.75 By the time the war ended and President Warren G. Harding came to power in 1921, there was a determined effort to restore laissez-faire capitalism.76 Harding’s philosophy was “The business of America is the business of everybody in America”; his successor, Calvin Coolidge, famously said, “The chief business of the American people is business.”77 But the two people who best embodied the hands-off philosophy of the decade were Andrew Mellon, treasury secretary from 1921 to 1932, and Herbert Hoover, secretary of commerce under both Harding and Coolidge and president from 1929 to 1933.

…

Although Greenspan was not a Wall Street banker—he headed a New York economic consulting firm for nearly thirty years before becoming Fed chairman—there came to be no truer believer in the ideology of free markets, financial innovation, and deregulation.
Greenspan was a “lifelong libertarian Republican” and a longtime associate of Ayn Rand, the philosopher and novelist who argued for pure laissez-faire capitalism.34 He believed in both the doctrine of efficient markets and the Reagan Revolution against governmental interference in the economy. He looked forward eagerly to a world without government regulation:
Regulation is inherently conservative. It endeavors to maintain the status quo and the special interests who benefit therefrom.… With technological change clearly accelerating, existing regulatory structures are being bypassed, freeing market forces to enhance wealth creation and economic growth.

I mean that the social market economy is a human creation, and not an impersonal machine, inhuman, cold, barking out commands, the way Americans such as Alan Greenspan conceive of it. The very constitutions of these countries, like the German Basic Law, make clear the purpose of the state is to protect people from the “excesses of capitalism.” Law professors actually state this in their lectures. In the Basic Law there is literally a provision to protect the family, and yes, it’s right wing and Catholic, but they’re serious about protecting the family against laissez-faire capitalism. In that sense, laissez-faire is unconstitutional. In defending the Gothic against the Classical, John Ruskin argued that, however flawed and imperfect the Gothic style might be, at least it was human and, because of that, greater and closer to the divine than the cold, impersonal Classical style could ever be. And so it is with the European model: however flawed, when compared to the “perfect” but impersonal Anglo-American model, at least it is a work of human beings and not machines.

Many years later, when he was wooing TV reporter Andrea Mitchell, who became his second wife, he ended a dinner date by inviting her back to his apartment, “where I showed her this essay I’d written on anti-trust for Ayn Rand.”2
The reference to Rand is perhaps as revealing as Greenspan’s unusual mode of courtship. For Greenspan was not a mere technician or a number cruncher. He was a man of powerful libertarian and free-market convictions who both captured and molded the spirit of his age.
As a young man, Greenspan had been captivated by the personality and ideas of Ayn Rand, a Russian exile, philosopher, and bestselling novelist who, as Greenspan puts it, “championed laissez-faire capitalism as the ideal form of social organization.”3 Debating with her, Greenspan later remembered, was “like starting a game of chess thinking I was good, and later finding myself in checkmate.”4 Rand was short, forceful, charismatic, and dominated many of her youthful disciples. One of them, Nathaniel Branden, became involved in an affair with her despite being twenty-five years her junior. (Rand convinced her own husband and Branden’s wife to accept this arrangement.)

Here is the stuff that is read somewhere between the ages of twelve and eighteen by a very large proportion, perhaps an actual majority, of English boys, including many who will never read anything else except newspapers; and along with it they are absorbing a set of beliefs which would be regarded as hopelessly out of date in the Central Office of the Conservative Party. All the better because it is done indirectly, there is being pumped into them the conviction that the major problems of our time do not exist, that there is nothing wrong with laissez-faire capitalism, that foreigners are unimportant comics and that the British Empire is a sort of charity-concern which will last for ever. Considering who owns these papers, it is difficult to believe that this is unintentional. Of the twelve papers I have been discussing (i.e. twelve including the Thriller and Detective Weekly) seven are the property of the Amalgamated Press, which is one of the biggest press-combines in the world and controls more than a hundred different papers.

She adopted the American name Ayn Rand. She was eventually moderately successful as a screenwriter, but her true claim to fame came through her political novels. Atlas Shrugged is widely regarded as one of the most influential books of the twentieth century. Published in 1957 at the height of the Cold War, it stridently rejects Soviet-style collectivism and instead proposes “Objectivism”—a libertarian philosophy championing laissez-faire capitalism and self-interested rational economic action. Atlas Shrugged pits the economic elite—the entrepreneurs and self-made CEOs of a future United States—against a system of political favoritism that rewards mediocracy, a system in which business decisions are made in the back rooms of Washington, DC.
Rand spins out a tale of moral, social, and technological decay caused by well-intentioned collectivism—an obvious reflection of the failure of Russian society and economy she witnessed in Saint Petersburg as a young woman.

…

However improbable, during the fog of an unprecedented world war, a revolutionary party seized power over a nation of more than 100 million people and fought off the Great Powers. Rejecting a long tradition of financial innovation and reliance on global capital markets, Russia instead villainized capitalism and formed itself in the image of the Communist Manifesto; a slim volume short on practical detail, written by two armchair revolutionaries and elaborated by them in a massive work of cultural criticism, penned in London, the bastion of laissez-faire capitalism. The strange schism of the twentieth century would not soon heal.
One might have expected that the world would divide itself along lines of religious intolerance. After all, the Crusades are still the rallying cry in parts of the Islamic world. But the notion that the theory of finance—in particular, a disagreement over the role of investors in society—could rip the world in two is difficult to conceive of ex ante.

…

But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism—which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object.1
J. M. KEYNES, THE GENERAL THEORY AMERICAN WAY
AMERICAN WAY
The seminar room was classic Harvard: paneled walls; a coffered ceiling; and a long, beautiful table. Professors and graduate students wandered into the room to take their seats following the accustomed pecking order that reserves prime spots for senior professors and chairs along the wall for doctoral students.

Not all of the leaders of Europe disagreed with FDR’s actions with respect to gold, however, including a conservative back bencher in the United Kingdom named Winston Churchill. Keynes subsequently wrote an article supporting FDR’s action. More than a few politicians understood that FDR, by following the thinking of Keynes, was essentially creating an alternative, a “middle way” between the laissez-faire capitalism of nineteenth century America and the Marxist socialism that was destroying Russia. Many people believed that a communist revolution threatened Europe and America equally.
But for most Americans, FDR’s actions with respect to gold and the dollar marked a repudiation of the past. In the wonderfully sarcastic book The New Dealers, published anonymously in 1934 by Simon & Schuster, the “Unofficial Observer” described the FDR devaluation and repudiation of gold, and what this meant for the way the U.S. economy performed:
On the one hand, you have the good old traditional way of doing business, which required the entire population of the country to “walk home” at twenty-year intervals in the name of God and the Gold Standard.

She did so as follows (Rand 1962, p. 35):
1. Metaphysics: Objective Reality
2. Epistemology: Reason
3. Ethics: Self-interest
4. Politics: Capitalism
In other words, reality exists independent of human thought. Reason is the only viable method for understanding reality. Every human should seek personal happiness and exist for his own sake, and no one should sacrifice himself for or be sacrificed by others. And laissez-faire capitalism is the political-economic system in which the first three flourish best. This combination, said Rand, allows people to "deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit." This is not to say, however, that "anything goes." In these free exchanges, "no man may initiate the use of physical force against others" (Rand 1962, p. 1).

…

The fact that the atomic bomb, the hydrogen bomb, and many even more destructive weapons have been invented does not mean we should abandon the study of the atom. Moreover, there may well be Marxist, communist, atheistic, and even immoral evolutionists, but there are probably just as many capitalist, theist, agnostic, and moral evolutionists. As for the theory itself, it can be used to support Marxist, communist, and atheistic ideologies, and it has; but so has it been used (especially in America) to lend credence to laissez-faire capitalism. The point is that linking scientific theories to political ideologies is tricky business, and we must be cautious of making connections that do not necessarily follow or that serve particular agendas (e.g., one person's cultural and moral decline is another person's cultural and moral progress).
8. Evolutionary theory, along with its bedfellow, secular humanism, is really a religion, so it is not appropriate to teach it in public schools.

As the great political economist Karl Polanyi famously argued in the 1940s, even the ostensibly freest markets require the extensive exercise of the coercive power of the state—to enforce contracts, to govern the formation of unions, to spell out the rights and obligations of corporations, to shape who has standing to bring legal actions, to define what constitutes an unacceptable conflict of interest, and on and on.19 The libertarian vision of a night-watchman state gently policing an unfettered free market is a philosophical conceit, not a description of reality.
The intertwining of government and markets is nothing new. The frontier was settled because government granted land to the pioneers, killed, drove off, or rounded up Native Americans, created private monopolies to forge a nationwide transportation and industrial network, and linked the land settled with the world’s largest postal system. Similarly, the laissez-faire capitalism of the early twentieth century was underpinned by a government that kept unions at bay, created a stable money supply, erected trade barriers that sheltered the new manufacturing giants, protected entrepreneurs from debtors’ prison and corporations from liability, and generally made business the business of government.
When the political economy of the Gilded Age collapsed, it was government that reinvented American capitalism.

Blanchflower clashed from the outset with King about how economics should be done: Blanchflower was mocked because his research included investigating the economics of happiness, for example. ‘From the first moment, war was declared.’
Back in 1981, King had been among 364 economists who had signed a public letter to The Times damning the then Chancellor Geoffrey Howe for his savage, City-pleasing deflationary economics. But, like so many of his contemporaries, King came to embrace the economics of the outriders, believing in laissez-faire capitalism and leaving the market to work its magic. King was the ‘classic example of a theorist who cares less about what the world actually looked like,’ says Blanchflower. ‘So there was an ideological bent, pretty much. The economists there were really dominantly those who Mervyn wanted.’ With an ideologue such as King firmly in place, those who disagreed with the Bank of England’s line could be quietly marginalized.

…

Unless an alternative is crafted that is coherent and credible, and which resonates with a mass audience, then the status quo is here to stay. That is what the neo-liberal outriders themselves realized many decades ago.
One of the false arguments thrown at opponents of the Establishment is that our alternative is simply statism, replacing the liberating free market with a stultifying, bureaucratic monstrosity. This is a false binary opposition: an alternative to laissez-faire capitalism does not mean top-down statism. In a sense the alternative to Establishment mantras is partly about rolling back the state. What is called the ‘free market’ is actually a con, a front in part for generous subsidies and handouts for the wealthy elite. A welfare state that was intended to provide social security for all has become distorted: it acts as a de facto source of income for low-wage-paying bosses and extortionate-rent-charging private landlords.

Perhaps someday we shall understand how truly to democratize economic
relations
Page 161
, and widespread use of public-purpose corporations may be a key part of
the plan. In the meantime, however, in the near- to medium- range
future-in terms of what we can do tomorrow, next week, and next
year-realism dictates presuming that the corporation's constitution will
remain much as it is: self-interested to the point of psychopathy. It
bears stating here that the corporation is an institutional reflection
of the principles of laissez faire capitalism. Changing it must be
understood as part of a larger project of economic change. The challenge
for now is to find ways to control the corporation- to subject it to
democratic constraints and protect citizens from its dangerous
tendencies-even while we hope and strive in the longer term for a more
fully human and democratic economic order. Improving the legitimacy,
effectiveness, and accountability of government regulation is currently
the best, or at least the most realistic, strategy for doing this.

The robber barons themselves found heartwarming justification for their doings in the Social Darwinism of Herbert Spencer, an English thinker who won a huge following in America for his doctrine of “the survival of the fittest” and his opposition to state intervention of all sorts, from tariffs to public education. “Light came in as a flood, and all was clear” was Carnegie’s reaction to Spencer. Rockefeller likened laissez-faire capitalism to breeding an American Beauty rose “by sacrificing the early buds which grew up around it. This is not an evil tendency in business. It is merely the working out of a law of nature and a law of God.”26
Others saw this pruning from the other side. In 1869, the historian Charles Francis Adams wondered whether the joint-stock corporation wasn’t a dangerous idea. Society had “created a class of artificial beings who bid fair soon to be masters of their creator.

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The Penguin and the Leviathan: How Cooperation Triumphs Over Self-Interest
by
Yochai Benkler

In the United States, Britain, and other liberal democracies, Leviathan took more benevolent forms: the burgeoning welfare state and the rise of government bureaucracies (ushered in by the New Deal in the United States, and by similar movements in Western Europe). By the late 1950s and early 1960s the pendulum began to swing back as concerns mounted over petty bureaucrats, unchecked discretion, and inefficiency. By the 1980s we were back in full swing toward laissez-faire capitalism; the Reagan and Thatcher governments in the United States and Britain, the rise of the efficiency- and free-trade-focused European Commission in Europe, and the emergence of the World Bank and the International Monetary Fund as bearers of what came to be known as “the Washington Consensus.” The Invisible Hand seemed to have completely won when even the center-left governments of the United States and the United Kingdom, under Bill Clinton and Tony Blair, busied themselves with dismantling welfare as we know it—replacing government bureaucracies with privatized, market-based alternatives—and deregulating the financial markets that flourished in New York and London.

The link between art and money is at times challenging but long standing, with
the first evidence of the art trade 5,000 years ago. The first well-documented art
markets developed in Italy and Flanders (modern Belgium) during the 15th century.
Even today, art from those times still appears on the market occasionally.
Despite its long history, the art market remains one of the last examples of
almost unregulated laissez-faire capitalism: one where supply tends to stimulate
demand and objects tend to become more highly valued as their original purpose (or
even beauty) is lost.
As Western investors experience slim returns on cash, weak stock markets,
falling property prices and the threat of deflation, art remains a safe haven, since it
tends to hold its value over a longer period while providing lower risk and higher
returns if part of a diversified investment portfolio.

We see the results of capitalism without a conscience all around us: the pollution of our environment, workers being injured or killed, the sale of dangerous products, the shameless promotion of risky mortgages for overvalued homes, and the wholesale loss of millions of jobs and trillions in savings.
The collapse of communism as a political system sounded the death knell for Marxism as an ideology. But while unregulated, laissez-faire capitalism has been a monumental failure in practice, the ideology is still alive and kicking. You can find all manner of free-market fundamentalists still on the Senate floor or in governors’ mansions or showing up on TV trying to peddle deregulation snake oil.
Given how close we were in 2008 to the complete collapse of our economic and financial system, anyone who continues to make the case that markets do best when left alone should be laughed off his bully pulpit.17
Despite the fact that many banks, car companies, and so on would be defunct without government intervention, the free-market fundamentalists continue to live in denial, trying to convince the world that if only left alone, free markets would right themselves.

He knew that evolution cares nothing for humans or their values – it moves, as he put it, like the wind – but he could not hold on to this truth, because it means evolution is a process without a goal. Progress implies a destination towards which one is travelling, whereas natural selection is simply drift.
The popular cult of evolution has always denied this truth, and in fact the most influential versions of evolution have never been Darwin’s. One was that of Herbert Spencer (1820–1903), the prophet of laissez-faire capitalism who invented the expression ‘survival of the fittest’. In Spencer’s version evolution was a teleological process – in other words, it had a goal: a universal state of complex equilibrium. Another version was developed by the French naturalist Jean-Baptiste Lamarck (1744–1829), who believed traits acquired during an organism’s lifetime could be inherited by future generations. Like Darwin, who in the third edition of Origin of Species (1861) praised Lamarck’s work for showing that all forms of life tend to progress, Lamarck viewed evolution as tending towards perfection.

Even the World Bank, once a severe critic of the capitalist model, has shifted dramatically in favor of market solutions to underdevelopment problems (with some important exceptions). The radical model of Marx and the socialists was clearly losing ground.
But it wasn't always that way. In fact, during most of the twentieth century, heavy-handed central planning was considered more efficient and more productive than laissez-faire capitalism. At the depths of the Great Depression, radical thinking dominated the atmosphere in intellectual and political circles. Suspicious of free-market capitalism, many were attracted to central planning and the Soviet model.
Ludwig von Mises and Friedrich Hayek were in the minority in questioning the collectivist Zeitgeist and offering a critique of socialism on purely economic grounds. Hayek published Mises's 1920 article,
"Economic Calculation in the Socialist Commonwealth," and other essays in a volume entitled Collectivist Economic Planning (Hayek 1935).

This period of rapid innovation in public and private finance, with the floating of joint-stock companies, the buying and selling of shares, the development of insurance schemes, and the public financing of government debt, all of which culminated in London's eventual displacement of Amsterdam as the world's financial center, is known today as the Financial Revolution. The need to fund expensive colonial wars made it necessary, and the fertile intellectual environment and speculative spirit of the coffeehouses made it possible. The financial equivalent of the Principia was The Wealth of Nations, written by the Scottish economist Adam Smith. It described and championed the emerging doctrine of laissez-faire capitalism, according to which the best way for governments to encourage trade and prosperity was to leave people to their own devices. Smith wrote much of his book in the British Coffee House, his base and postal address in London, and a popular meeting place for Scottish intellectuals, among whom he circulated chapters of his book for criticism and comment. So it was that London's coffeehouses were the crucibles of the scientific and financial revolutions that shaped the modern world.

When we think of mercantilism, we usually think of England and Spain in the sixteenth or seventeenth centuries, trying to amass as much gold and silver as they could get their hands on. A mercantilist trading policy is one in which a government protects and heavily subsidizes key industries, exporting as much as possible and importing as little as possible. The great Scottish philosopher and economist Adam Smith said the remedy to mercantilism was laissez-faire capitalism. The “invisible hand” of capitalism has always struggled with the heavy hand of government meddling.
The U.S. trade deficit, which had fallen 60 percent during Reagan’s second term and into the elder Bush’s presidency, began to expand again in the early 1990s.7 The move toward free trade (which we’ll discuss at greater length in chapter 5) left U.S. industries vulnerable once again to predatory foreign trade practices.

Companies that raise billions of dollars, some of it from immensely wealthy investors, have a legitimate business interest in decorating their quarters in a manner apt to impress such investors. The financial crisis was indeed the consequence of decisions, some mistaken, by financiers. But the mistakes were systemic —the product of the nature of the banking business in an environment shaped by low interest rates and deregulation rather than the antics of crooks and fools.
Laissez-faire capitalism failed us, but government allowed the preconditions of depression to develop and wreak havoc with the economy. And its responses to the crisis were late, slow, indecisive, and poorly articulated. The responses also created "moral hazard" (the tendency to engage in risky behavior if one is insured against the consequences of the risks' materializing). They did this by eliminating the limits on federal deposit insurance of bank deposits and by extending that insurance to checkable accounts in money market funds, but more important by bailing out failing firms deemed "too big to fail"—an incentive for corporate giantism and financial irresponsibility (which go hand in hand because the difficulty of controlling subordinates grows with the size of an organization).

But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism – which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object.4
The crash when it came first hit the banks.5 They had overextended their lending and bought each other’s dubious packages of securitized mortgages and other derivative products. It was like the children’s game of Pass the Parcel. When the music stopped, each was left holding a parcel and did not know what the parcel contained.

In the words of one prominent academic observing the discussions, “When the world’s biggest economy and the world’s biggest emerging economy look for lessons in the same place at the same time, you know something is up. We are seeing a paradigm shift toward a more European state.”
America represents a late-twentieth-century role model for managing political-economic modernity, but the future will reveal an increasing number of variants and formulas. The more universal the acceptance of capitalism becomes, the more its many shades of gray are revealed, most notably between what was once American laissez-faire capitalism and the surging Asian state capitalism. Within that spectrum, only two real criteria separate winners from losers among models of entrepreneurial capitalism: those that enforce contracts and attract innovation and those that don’t.
In other words, we are in an up-for-grabs era of economic management, one in which mixed models compete to pull their countries ahead and, in doing so, set examples that others will follow.

In a thoughtful essay in Harper’s magazine entitled ‘Reflections on Bullshit’, Frankfurt sought to develop a philosophical theory to distinguish ‌between truth-tellers, liars and bullshitters.34 In a nutshell, his argument, as it might apply here, is that those who assert that social security is a threat to freedom while enthusiastically taking advantage of its benefits, are not necessarily lying, they’re simply disregarding the truth in order to advance their agenda.
Liars are people who deliberately tell untruths. Bullshitters, on the other hand, don’t really care about the truthfulness of their assertions. When Koch discovered Hayek could qualify for social security, he wasn’t horrified by the implications of this for Hayek’s personal liberty, nor was he worried that this godfather of laissez-faire capitalism would end up on some private road to serfdom. It’s hard not to conclude that the right’s claims about the freedom-depriving nature of social security are nothing more than empty statements meant to advance a larger agenda. Neoliberals and libertarians seem to be simply pretending to be concerned about the political and economic effects they allege. In reality, they don’t appear to care about these things at all.

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The Man Who Knew: The Life and Times of Alan Greenspan
by
Sebastian Mallaby

The proper subject for art was “greatness, intelligence, ability, virtue, heroism,” and if portraying such qualities constituted an escape, “then medicine is an ‘escape’ from disease, agriculture is an ‘escape’ from hunger, knowledge is an ‘escape’ from ignorance, ambition is an ‘escape’ from sloth, and life is an ‘escape’ from death. . . . A hard-core realist is a vermin-eaten brute who sits motionless in a mud puddle, contemplates a pigsty, and whines that ‘such is life.’ If that is realism, then I am an escapist. So was Aristotle. So was Christopher Columbus.”25
As a passionate Romantic, Rand favored the economic system that “demands and rewards the best in every man, great or average, and which is, obviously, laissez-faire capitalism.” She had arrived in the United States as a near-penniless student, sailing into New York Harbor in 1926, the year of Greenspan’s birth, and had been immediately enthralled by the skyline that greeted her. The Standard Oil Building, the Singer Tower, the Woolworth Building—these were the triumphant expressions of capitalism’s creative power; they were “the will of man made visible.” The industrialists who had commanded these structures into being were heroes in Rand’s mind—she shared Greenspan’s enthusiasm for the robber barons of yore, but she took it much further.

…

“My problem with your nomination,” Proxmire summed up, “is that it is very difficult, because you are honest, you are capable, and some of the things that you propose I enthusiastically applaud; but I have a great, great difficulty with the fact that you are a free enterprise man who does not believe in antitrust, does not believe in consumer protection, does not believe in progressive income tax. . . . The old-style laissez-faire capital system is dead,” Proxmire continued; the challenge for intelligent policy makers in the late twentieth century was how to make the mixed economy work better. “With the greatest goodwill in the world, you are not going to go back to Adam Smith. You know that.”
“I am aware of that,” Greenspan conceded. But he was still not backing off. However popular the mixed economy, its existence was precisely the problem.

…

He flattered Wayne Angell, a particularly volatile governor, by complimenting him on his television performances and inviting him to play tennis; he invited other senior colleagues and their wives over to Andrea’s for dinner.63 As a private consultant, Greenspan had clashed with the Fed’s general counsel, Michael Bradfield, even trading heated personal insults after disagreeing about the regulation of the S&Ls on a public panel. But now Greenspan made amends, treating Bradfield and his wife to a concert at the Kennedy Center. When the Journal’s crack reporters called around their sources for comments on the new chairman, they encountered nothing but warm praise. Greenspan had covered all his bases.
If Black Monday boosted Greenspan’s reputation, the same could not be said for laissez-faire capitalism.64 The presumption of market efficiency, which had dominated academic finance since the late 1960s, now demanded a rethink. Statisticians pointed out that extreme falls in prices occurred far more commonly than was assumed in the efficient marketers’ equations. Behavioral economists invoked psychological experiments that showed the limits to investors’ rationality.65 For Greenspan, who had never bought into the efficient markets hypothesis, none of this revisionism upset his settled views; but there were other lessons from the crash that did challenge his thinking.66 Black Monday forced him even further from his youthful conviction that central banks ought to allow private financiers to go bust; and it drove him to reconsider his belief that a steep fall in the market would drag down the real economy.

Historically, this problem triggered what Polanyi calls the double movement, as society “protected itself against the perils inherent in a self-regulating market system” (Polanyi 1957b: 80). Although incoherent and unplanned, this countermovement led ultimately to a paradoxical situation whereby the only way of realizing the “stark utopia” (Polanyi 1957b: 218, 250) of the self-adjusting market was through the support of a strong interventionist state. He wittily describes this system as planned laissez-faire capitalism: “There was nothing natural about laissez-faire, free markets could never have come into being merely by allowing things to take their course … laissez-faire itself was enforced by the state” (Polanyi 1957b: 145).
The double movement that Polanyi describes consists of the reembedding of market institutions within society. It is important to bear in mind that Polanyi’s use of the term “embeddedness” differs quite significantly from its subsequent use in economic sociology.

Among moderate proponents, the commons is understood as compatible with private property and a capitalist market, although certainly acting as a bulwark against some of their worst abuses.14 The more liberal facet of the commons endeavor is but one moment within a broader liberal critique of the neoliberal face of capitalism. In an Atlantic Monthly article, reformed financial tycoon (now also philanthropist) George Soros (1997) enunciated the basic terms of this liberal critique: “the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society.”
The most influential articulations and organizations within this nascent commons movement have been those founded by Lessig (1999, 2001b; Creative Commons) and David Bollier (2002, 2009; Public Knowledge). These in turn have helped spawn offshoots, such as the Students for Free Culture movement, which is organized into clubs on colleges across North America.

At the beginning of the twentieth century, France was a highly evolved capitalist economy. The market capitalization of companies listed on the Parisian bourse reached 78 percent of French GDP, more than the value of the firms on the New York Stock Exchange as a share of the American economy. But the Great Depression and the German occupation delivered a shock to the faith of the French in the Third Republic. And their faith in laissez-faire capitalism suffered a permanent blow too.
The history of capitalism is punctuated by changes of direction in response to crises. In the 1930s, even as most major economies were mired in what would come to be known as the Great Depression, economic orthodoxy had it that government had no role to play in economic management. After the stock-market crisis of 1929 Secretary of the Treasury Andrew Mellon argued that government should stay out.

First, it is sometimes suggested that arguments against markets will only persuade those with leftish politics. However, there are many contemporary restrictions on free markets which find favour with the traditional Right.
Examples include immigration controls and planning law. More importantly, the idea that expanding the domain of markets represents a return to the heyday of 19th-century laissez-faire capitalism, before the dead hand of government began to interfere, is a grotesque misrepresentation of history. It was Victorian capitalists who first developed the idea of a public service ethos, because they recognized the need to separate politics, specifically the civil service, from business interests. Similarly, the commercialization of education is a very recent trend; private schools in the UK were mostly established as charities.51
Second, it is often claimed that only arguments couched in terms of money have any persuasive power in the world of realpolitik.

By bringing peace to a region riven with wars and rivalries and by integrating markets, the EEC contributed to the economic development in the member countries.
The most influential explanation of the Golden Age is, however, that it was mainly the result of reforms in economic policies and institutions that gave birth to the mixed economy – mixing positive features of capitalism and socialism.
Following the Great Depression, the limits of laissez-faire capitalism came to be widely accepted. It was agreed that the government should take an active role to deal with the failings of unregulated markets. At the same time, the success in wartime planning during the Second World War diminished scepticism about the feasibility of government intervention. Electoral successes by parties of the left in many European countries, thanks to their key roles in fighting fascism, led to the expansion of the welfare state and greater labour rights.

Facebook’s reduction of people to predictively modeled profiles and investment banking’s convolution of the marketplace into an algorithmic battleground were not the choices of machines but of humans.
Those who choose to see technology as equal to life end up adopting a “let it rip” approach to its development that ignores the biases of the many systems with which technology has become intertwined. The answer to the problems of technology is always just more technology, a pedal-to-the-metal ethos that is entirely consonant with laissez-faire capitalism. Ever since the invention of central currency, remember, the requirement of capitalism is to grow. It should not surprise us that in a capitalist society we would conclude that technology also wants to grow and that this growth supports the universe in its inexorable climb toward greater states of complexity.
However, I find myself unable to let go of the sense that human beings are somehow special, and that moment-to-moment human experience contains a certain unquantifiable essence.

His impartiality was believable to the public precisely because of his long-demonstrated unscrupulousness and political spinelessness: he sucked up with equal ferocity to presidents of both parties and courted pundit-admirers from both sides of the editorial page, who all blessed his wrinkly pronouncements as purely nonpartisan economic wisdom.
Greenspan’s rise to the top is one of the great scams of our time. His career is the perfect prism through which one can see the twofold basic deception of American politics: a system that preaches sink-or-swim laissez-faire capitalism to most but acts as a highly interventionist, bureaucratic welfare state for a select few. Greenspan pompously preached ruthless free-market orthodoxy every chance he got while simultaneously using all the powers of the state to protect his wealthy patrons from those same market forces. A perfectly two-faced man, serving a perfectly two-faced state. If you can see through him, the rest of it is easy.

But George Soros explains why his
mind and his money are pitted against the system that made him fabulously
wealthy.’ However, the Soros fortune remains firmly invested in the markets.
His argument is with a particular fundamentalist version of free-market economics. The article begins: ‘Although I have made a fortune in the financial
markets, I now fear that the untrammelled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our
open and democratic society.’ The danger, he believes, is the development of
‘robber capitalism’, the ‘gangster state’ — in other words, a world of inequality,
exploitation and instability, where a few have the freedom to become rich at
the expense of the many, terrorised and lacking in opportunities.
The Soros conversion delighted all those left-wing commentators who
had clung to the belief throughout the heyday of Thatcherism and
Reaganomics that free markets were undesirable: that they did not work and
had unwelcome social consequences.

In order
to keep alive its mystique, he dragged the secret formula out of a company
vault in New York and personally transferred it by train to a safe-deposit
box in the Trust Company bank in Atlanta—where it supposedly remains
to this day. In his mind he’d hit upon the perfect product, one that could
sell in any economic time, and—with the success of its “Thirst Knows No
Season” ad campaign—any climate. “Robert Woodruff could still look out
on an America that justified his bedrock faith in laissez-faire capitalism,”
write J. C. Louis and Harvey Yazijian. “This faith informed his fundamen­
tal opposition to socialism, and later, to Franklin Delano Roosevelt.”
Roosevelt’s New Deal was, like the Progressive movement half a century
earlier, a backlash against the greed of corporations, who were blamed by
many for the crash. The government moved in to regulate the stock market
and the banking industry, along with other businesses.

In order to keep alive its mystique, he dragged the secret formula out of a company vault in New York and personally transferred it by train to a safe-deposit box in the Trust Company bank in Atlanta—where it supposedly remains to this day. In his mind he’d hit upon the perfect product, one that could sell in any economic time, and—with the success of its “Thirst Knows No Season” ad campaign—any climate. “Robert Woodruff could still look out on an America that justified his bedrock faith in laissez-faire capitalism,” write J. C. Louis and Harvey Yazijian. “This faith informed his fundamental opposition to socialism, and later, to Franklin Delano Roosevelt.”
Roosevelt’s New Deal was, like the Progressive movement half a century earlier, a backlash against the greed of corporations, who were blamed by many for the crash. The government moved in to regulate the stock market and the banking industry, along with other businesses.

Unfortunately, his shows have often been slanted in favor of the chemical industry, food irradiation, and large-scale agribusiness, and he has had a long and troubling history of sacrificing accuracy to promote his far right-wing personal ideology. "I have come to believe that markets are magical and the best protectors of consumers," he once declared. "It is my job to explain the beauties of the free market."'1 Unfortunately, this enthusiasm for laissez-faire capitalism has too often led Stossel to neglect his job as a journalist-seeking truth and reporting it.16 According to Jeff Cohen, the director of Fairness and Accuracy in Reporting (FAIR), "Stossel's clearly one of the most biased reporters in the business."
Even with Stossel's public apology, many who had seen the original program were left confused, with the mistaken idea that since organic farmers favor manure over agrochemicals, organic produce might carry a heightened risk of E. cola infection.

It even had a Division of Consumer and Community Affairs, to look after the interests of bank customers. The Fed, in other words, was a regulator. Greenspan, however, was not.
As a young economist, Greenspan had come under the spell of Ayn Rand, the author of The Fountainhead and Atlas Shrugged, two of the most influential odes to capitalism ever written. The capitalism Rand believed in was “full, pure, unregulated, laissez-faire capitalism,” as she once put it, the kind that didn’t put regulatory roadblocks in the way of red-blooded entrepreneurs. Greenspan met Rand in the early 1950s, became part of her inner circle, and remained close to her until she died in 1982.
A conservative economist like Greenspan is always going to tilt against regulation. But Rand gave his leaning a philosophical underpinning and helped turn him into a true free-market absolutist.

Campaign aide David Gergen tried to inject them and told Ford that “the Democrats ran against Hoover for years, and we should do the same about the ’60s.”40 But the president did not follow that script. The economy was the major issue. Ford waged a classic Republican campaign. Too much government spending deprived business of the capital it needed to invest. Inflation, caused by budget deficits, encouraged people to borrow, not save, and this inhibited investment, too. The script was not a return to laissez-faire capitalism, but the ideas did rest upon pre-Keynesian notions.
The president had his work cut out for him. After the Republican convention, polls showed Carter enjoying a 52–37 percent advantage. Ford’s advisers told him that the new campaign finance law impaired the campaign: “We no longer have the previous advantage of being able to outspend our opponent.” Unlike Nixon in 1972, we “can’t woo voter blocs through extensive government programs and patronage.

The managers of factories that produced consumer goods would be ordered to operate their facilities as cheaply as possible while trying to break even. This directive would lead them to economize on inputs, including labor, and to set prices that just covered their costs, which is what firms in competitive markets are driven to do.
This argument had clear echoes of Pareto and Barone, and even of Hayek, who had never doubted that laissez-faire capitalism was efficient. In many ways, Lange and Hayek had come to view the free market in a similar way: as a machine that solved allocation problems. (The big difference between them was over whether a socialist economy, even one with some freely determined prices, could replicate the market’s efficiency.) Lange’s 1936 essay included a clear verbal exposition of how competitive markets generate efficient outcomes.

Commenting on the former chairman Matt Ridley’s views, George Monbiot writes:
As chairman of Northern Rock, he was responsible, according to the Treasury select committee, for the ‘high-risk, reckless business strategy’ which caused the first run on a British bank since 1878 . . . Before he became chairman, a position he appears to have inherited from his father, Matt Ridley was one of this country’s fiercest exponents of laissez-faire capitalism. He described government as ‘a self-seeking flea on the backs of the more productive people of this world … governments do not run countries, they parasitise them. …’
What did the talented Mr Ridley learn from this experience? The square root of nothing. He went on to publish a book in which he excoriated the regulation of business by the state’s ‘parasitic bureaucracy’ and claimed that the market system makes self-interest ‘thoroughly virtuous’.

While his analysis of the
politico-economic dynamics of Western countries pointed to socialism as the
"likely heir apparent," he recognized several other possibilities, including one
in which the political economy would become lodged in a "halfway house"
short of full-fledged socialism. 4
The Schumpeterian model of politico-economic dynamics, which indicates a probable transition from capitalism to socialism, rests on four central
propositions: (1) Large corporate firms, bureaucratically managed and routinely innovative, displace the entrepreneurs and owner-managers of classic
capitalism, thereby shrinking the size, attenuating the economic function, and
diminishing the social and political standing of the business class. (2) As
capitalism matures, society grows ever more "rational," which causes a loss
of respect for and allegiance to such extra-rational institutions as private
property rights and freedom of contract. (3) Capitalism nurtures a growing
intellectual class that, ironically, is inherently hostile toward the system that
makes possible its existence. (4) As the opposition of intellectuals, labor
unionists, and their allies mounts, the bourgeoisie loses faith in its traditional
values and ideals; its defense of the free-market system grows steadily weaker
as it accommodates itself to a political environment that gives ever greater
priority to social security, equality, and governmental regulation and planning. While Schumpeter recognized at the end of the 1940s a residual capitalist vitality in the American economic order, he emphasized that "we have
traveled far indeed from the principles of laissez-faire capitalism." 5
Although he conceded that crises such as war or depression would accelerate the secular tendencies, he denied that "any mere 'events,' even events of
the importance of 'total wars,' or the political situations created thereby, or
any attitudes or feelings entertained by individuals or groups on the subject
of these situations, dominate the long-run contours of social history-these
are a matter of much deeper forces."

Freakonomics, the runaway best seller and its follow-up New York Times Magazine column, applied this model of “rational utility-maximization” to human behaviors ranging from drug dealing to cheating among sumo wrestlers. Economics explained everything with real numbers, and the findings were bankable. Even better, the intellectual class had a new way of justifying its belief that people really do act the way they’re supposed to in one of John Nash’s game scenarios.
Ironically, while the intelligentsia were using social evolution to confirm laissez-faire capitalism to one another, the politicians promoting these policies to the masses were making the same sale through creationism. Right-wing conservatives turned to fundamentalist Christians to promote the free-market ethos, in return promising lip service to hot-button Christian issues such as abortion and gay marriage. It was now the godless Soviets who sought to thwart the Maker’s plan to bestow the universal rights of happiness and property on mankind.

The Montana Department of Fish and Game had offered to finance the installation of an electric fence. . . In court Schuler claimed he shot the bear in self defence, an argument the judge didn’t buy. Two environmental groups have since paid to have an electric fence installed around Schuler’s corral.8
Ralph Maughan and Douglas Nilson, academics from Idaho State University, suggest that the Wise Use agenda stems from an ideology that combines laissez-faire capitalism with “cultural characteristics of an imagined Old West”. The resulting beliefs include the following:9
1. Human worth should be measured in terms of productivity and wealth. Status and power are a reward for hard work.
2. Nature is there for the use of humans.
3. Real wealth derives from extracting and adding value to primary material resources.
4. “Productive lands and waters should be owned (or at least controlled) and tamed by producers.

Even
two years later at the London Economic Conference in the summer of
1933 the delegates who represented 66 of the world’s major countries
clung to the orthodox view that the gold standard could be patched
back together (but their hopes would be dashed by Roosevelt’s bombshell message that America would devalue). Against a larger backdrop,
the world had been in flux from the turn of the century. It was challenged by the destruction of Europe in world war, inflation, deflation,
and the beginnings of fascism in Germany and Italy as a “third way”
between laissez faire capitalism and communism (which had overtaken
Russia). In science, the world had already been shaken by the breaking of Newtonian physics by relativity theory; in music, chromaticism seemingly took to an extreme the rejection of rhythm, melody,
and harmony; in painting, perspective had been abandoned for cubism,
expressionism, and other abstract forms. Rejecting gold for paper, even
after the horrendous inflations of the 1920s, must have been heretical
and dangerous in the opinions of many.

No one ever made money off of anybody else’s customer base and so grid instability in any one region could serve as an object lesson for utilities dealing with the same issues in their own locales. Since 2000, however, not only is there far more information pouring into utility databases—a product of the widespread introduction of computerization at many points in the system, of which digital “smart” meters are the most infamous—but that information is treated as proprietary. Electricity trading, in this way, fails to be laissez-faire capitalism because nobody quite has access to the information necessary to make real-time decisions about how to manage their systems, and thus also their capital. Not even, oddly, the utilities themselves, since they now have so much information to contend with that most of it sits unprocessed in giant servers called “historians.” Big data has become just another modern way to use up electricity.

The lame duck syndrome afflicted Ronald Reagan’s last two
years in office when a combination of the term limitation and the Iran-Contra
scandal drained the lifeblood out of his presidency.
Democrats regained control of the U.S. Senate in 1986 and joined their colleagues in the U.S. House to dictate the domestic agenda to the White House.
The president had to accept legislation he would have preferred to veto, like the
plant-closing law that required companies to give sixty-five days’ notice to their
workers before shutting down a facility. The law was a slam on the laissez-faire
capitalism and free market idealism so dear to the heart of the GOP. In 1988,
Congress overrode Reagan’s veto of the Civil Rights Restoration Act. The president called it a ‘‘quota bill,’’ but in suffering a veto override he further alienated
African Americans from the party of Abraham Lincoln and the Emancipation
Proclamation. The political initiative shifted from the White House to Congress,
and it became harder for Reagan’s nominees to high administrative offices to be
confirmed.

Ten miles away from the frontier, still deep inside a China of timeless rural peace—workers knee-deep in the paddy fields, ducks straggling along the roadside, the occasional bullock-cart lumbering down a muddy lane—we passed two unexpected signs of the new, post-Mao order: a petrol station, run by Texaco (though no cars were taking advantage of it), and a tall, electrified fence, with watchtowers and a massive and well-guarded border control post, such as you might find when taking the autobahn from Vienna to Budapest.
This was not the frontier with Hong Kong, however. It was a new ‘internal’ frontier that divided the special economic zone of Shen Zhen from Marxist orthodoxies of the rest of China—the zone being a sort of halfway house, an airlock, between the rigidities of the Communist world and the laissez-faire capitalism of the Crown colony. It is a frantically busy place, with factories and tower blocks and hotels (most of them paid for by wealthy Hong Kong investors) rising out of the paddy fields, and restaurants jammed solid with a new Chinese élite who are making money on a scale of which Mao would never have dreamed.
And then, dark on a distant hill, the first sign of a familiar Empire: the square and battlemented outline of a fort.

Despite studies indicating that these measures would reduce the risk of wrongful convictions, American police and courts have generally not adopted them.12
11.9.2 Oversupply of law
Under a legal system based on a central authority with legislative powers, a great deal more law is provided than under a pure common-law system. Some see that as an advantage – perhaps we need a strong network of regulations to protect us against the failures of laissez-faire capitalism. Nevertheless, it is worth considering whether a governmental system might provide too much law.
As an exercise, try to imagine an ideal legal system. Before reading on, try to estimate how many pages worth of laws that system would contain. There are many difficulties with making such an estimate; nevertheless, attempting at least a vague, order-of-magnitude estimate before finding out how much law actually exists may help to forestall the tendency to rationalize the status quo.

Most of the recent success in the world economy is happening in Eastern and Southern Asia, not as a result of some global plan to end poverty but for homegrown reasons.
Moreover, the success stories follow a variety of formulas, perhaps an indication of an exploration that reflected each country’s unique history and characteristics. South Korea’s government intervened in guiding its corporations, while Hong Kong was the poster child for laissez-faire capitalism. China is a unique blend of Communist Party dictatorship, state enterprises, and partial free-market liberalization. India is a long-standing democracy, South Korea and Taiwan more recent democratic converts, while Singapore is not a democracy. All of these cases did realize most of their success from markets, but some were quite far from a laissez-faire model. While I think that free markets and democracy are a big part of the success story of the West, countries sometimes take a circuitous route to get there, or they may conceivably have their own unique recipe.

America Right or Wrong: An Anatomy of American Nationalism
by
Anatol Lieven

The
political importance of the religious factor is of course not peculiar to the United
States. As long as religious belief and adherence remained of great importance in
certain Western European societies, it also had a critical effect on political allegiances in those countries—sometimes, unfortunately, in extremist directions. The
tragicomic aspect of the situation of politically conservative American religious
believers is that the laissez-faire capitalism which they support is not only undermining their economic world, but through the mass media and entertainment
industries is also playing a central role in biting away at their moral universe.
Godly Republicans
Conservative religiosity thus plays a very important part in U.S. politics, and especially in the Republican Party. Its growth has formed part of the "southernization"
of that party in recent decades.

pages: 504words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard
by
Fredrik Erixon,
Bjorn Weigel

Industrial policy is popular again and Western countries sprinkle money over particular sectors, often with the expressed intention of giving them a direct competitive advantage over their foreign competitors. Other forms of regulation are becoming far more detailed and prescribe a certain behavior, adding new regulatory costs and deterring entrepreneurship just by the sheer volume of regulations that a business needs to absorb. In the United States – that mythological example of laissez-faire capitalism – states are banning people from selling home-baked bread without a commercial license.50 Almost 900 measures restricting foreign trade were imposed in the US between 2008 and 2015.51
Regulation is back in fashion and Figure 6.2 shows this trend for selected Western countries by using data on regulatory performance in the Fraser Institute’s ranking of economic freedom in the world. Economic regulations concerning credit, labor, and business were reduced or eliminated in most of these countries from the late 1970s up to the early 2000s – leading to a higher index rate – but in the past 10 to 15 years, regulations have again become more stringent in Europe and, notwithstanding an upturn in recent years, the United States.

pages: 419words: 130,627

Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase
by
Duff McDonald

The early going was tough for Greenspan—the stock market crashed in the fall of 1987 and the national economy sputtered for most of the first half of the 1990s—but by the latter half of the decade, things were humming along.
A disciple of the objectivist philosopher Ayn Rand—author of Atlas Shrugged and The Fountainhead—Greenspan was a vocal, if often convoluted, proponent of free-market ideology and laissez-faire capitalism. Famous for his intentionally incomprehensible testimony in front of Congress—he was legendary for saying nothing in a complicated way—he was nevertheless widely trusted for his market acumen. Bankers particularly adored him. By relaxing the Glass-Steagall Act, he opened the door for banks to become major deal makers and create new financial empires.
Passed in 1933 in response to the crash of 1929, Glass-Steagall was intended to prevent deposit-taking banks from incurring too much risk.

BusinessWeek went so far as to suggest that McKinsey had deliberately turned a “blind eye to signs of trouble” in order to perpetuate the lucrative relationship.21 It was also perpetuating McKinsey’s self-image as the cutting-edge intellectuals of the corporate suite. McKinsey partner Richard Foster’s 2001 book, Creative Destruction, was nothing short of a big wet kiss to Enron’s way of doing business. It was also a mere repackaging of economist Joseph Schumpeter’s own work on the strengths of capitalism a half century before, but with a crucial twist: It was celebrating the worst instincts of laissez-faire capitalism, not the best.
The War for Talent, a 2001 book by McKinsey consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod (now head of HR at eBay), might have been an even wetter kiss for Enron than Creative Destruction. The book set off a worldwide craze for a raft of flimsy ideas, many of which were based on simple observation of Skilling’s management style and practices, a large part of which had come out of McKinsey itself.

With prophetic clarity, Proudhon at the end of his life observed that
the doctrinaire, authoritarian, dictatorial, governmental, communist system is based on the principle that the individual is essentially subordinate to the collective; that from it alone he has his right and life; that the citizen belongs to the State like a child to the family; that he is in its power and possession, in manu, and that he owes it submission and obedience in all things.106
As for the dictatorship of the proletariat advocated by Marx, Proudhon argued prophetically that it would ensure universal servitude, all-encompassing centralization, the systematic destruction of individual thought, an inquisitorial police, with ‘universal suffrage organized to serve a perpetual sanction to this anonymous tyranny’.107 In place of laissez-faire capitalism and State socialism, Proudhon finally proposed once again his system of mutualism as the only way to create a free society: ‘In this system the labourer is no longer a serf of the State, swamped by the ocean of the community. He is a free man, truly his own master, who acts on his own initiative and is personally responsible.’108
When it came to practical tactics, Proudhon rejected the remedy of the trade unions and the parliamentary road to power.

…

But where Warren looked to ‘equitable’ individuals to work out the cost, Tucker relied on their self-interested conduct in a free market (that is, one which has abolished money, tariffs and patents). He also believed that absolute equality is not desirable: people should enjoy the results of their superiority of muscle or brain. But while retaining private property and admiring certain aspects of laissez-faire capitalism, he was critical of the ‘system of violence, robbery, and fraud that the plutocrats call “law and order”’.28 Although Emma Goldman complained that his attitude to the communist anarchists was ‘charged with insulting rancor’, he remained a left- rather than a right-wing libertarian.29
Like Godwin, Tucker looked to the gradual spread of enlightenment to bring about change. He made a plea for non-resistance to become a universal rule.

At the time, he also met an intelligent, pretty painter in New York City, Joan Mitchell (not the celebrated Abstract Expressionist), who soon became his first wife. She introduced him to Ayn Rand and her circle. Greenspan’s ideology was more deeply ingrained in him by the charismatic writer and philosopher than by his economic education. Rand was the Russian-born self-declared “objectivist” philosopher who vehemently advocated laissez-faire capitalism, and had a profound, passionate distaste for government. Her best-selling romantic novels, The Fountainhead and Atlas Shrugged, whose masculine heroes were individual icons, extended her influence and made her wealthy. In the 1960s, Greenspan wrote several essays for the Rand publication, The Objectivist. In these extremist essays he called for linking the dollar only to gold and he scathingly criticized both consumer protection and antitrust laws because they interfered with the free market.

The newSoviet culture was meant to reach technical modernity through collective proletarian effort, not bourgeois self-help. It was part of the vast campaign of ‘de-peasantization’.76 The new‘Soviet man’ would embrace science and socialism in the certain belief that capitalist societies were on course to self-destruct. In Germany too the culture of liberalism came under heavier fire after 1918. This was no coincidence. There was long-standing antipathy on both Left and Right to the corrosive effect of laissez-faire capitalism on social cohesion. Part of the appeal of a German-led Mitteleuropa had been its offer of a middle way between the backward East and an over-commercialized West. The trauma of defeat, the ‘loss’ of millions of Germans permanently separated from the newGerman state, and the devastating impact of economic shocks from outside created a powerful sense of social and cultural crisis. Only a strong state could save the German Volk from being broken on the wheel of international capitalism, with its ruthless disregard for authenticity and belonging.

The trademark conservatism of the militant New Right was coined by Senator Barry Goldwater of Arizona, a handsome, straight-talking, ardently anti-government, anti-union conservative who lit the fire of ideological rebellion within the Republican Party in the 1960s. By breaking with traditional GOP conservatism and spurning the bipartisan consensus that governed America, Goldwater opened a polarizing cleavage between the two parties and provided an ideology for New Right crusaders for the next fifty years.
As a vehemently anti-union head of two family-owned department stores in Phoenix, Goldwater was an apostle of pure laissez-faire capitalism. He rejected the mainstream conservatism of Dwight Eisenhower and Richard Nixon, who talked about limited government but embraced the status quo, including New Deal programs, and who pushed government regulation of business to protect consumers and workers.
By contrast, Goldwater advocated repealing or revamping Social Security and warned that the welfare state and a permissive society were undermining America’s morals.

When selling his Range Rover, he suffered a loss of 50 percent of the price he paid 6 months ago. The proceeds from the sale of the car (despite the 50 percent loss) would have allowed the banker to purchase five times the number of bank shares he originally sold to finance the car. In Iceland, there was an oversupply of Range Rovers, now known as “Game Overs.”
Crying Games
Nicolas Sarkozy, president of France, pronounced laissez faire capitalism dead: “C’est fini!” Wang Qishan, vice-premier of China, tartly observed: “The teachers now have some problems.”21 Luiz Inácio “Lula” da Silva, president of Brazil, blamed the global financial crisis on “the irrational behavior of white people with blue eyes, who before the crisis appeared to know everything, but are now showing that they know nothing.”22 He termed it “an eminently American crisis” caused by people trying to make a lot of “third-class money.”

Shifting pendulum between markets and state
It is hardest to quantify this trend, but it is clear that the decades since the early 1980s witnessed globally spreading capitalism. Many centrally planned economies turned into market economies and even China embraced economic liberalism while nominally remaining a communist state. Deregulation, liberalization of cross-border flows, and falling top (and other) tax rates were other prevalent trends.
The pendulum is shifting back. A backlash against laissez-faire capitalism is understandable after financial market excesses and turbulence caused the worst global recession in decades in 2008. While the reasons for this crisis can be debated, the consensus view blames free market ideology as much as greedy bankers, reckless home buyers, or misguided government policy. More regulation will certainly follow. Stretched public finances also make higher taxes inevitable down the road.

But before undertaking a new stage of our analytical trip, I will recast the argument presented in this chapter. In sum, what is the new economy?
The new economy is certainly, for the time being, a capitalist economy. Indeed, for the first time in history, the whole planet is capitalist or dependent on its connection to global capitalist networks. But this is a new brand of capitalism, technologically, organizationally, and institutionally distinct from both classical (laissez-faire) capitalism and Keynesian capitalism.
As the empirical record (in spite of all the measurement problems) seems to indicate at the turn of the millennium, the new economy is/will be predicated on a surge in productivity growth resulting from the ability to use new information technology in powering a knowledgebased production system. For new sources of productivity to dynamize the economy it is, however, necessary to ensure the diffusion of networking forms of organization and management throughout the economy – and networks are indeed spreading throughout the entire economy, phasing out, through competition, previous, rigid forms of business organization.

In
1983 as part of the LaFalce Plan, House Democrats called for a new Bank
for Industrial Competitiveness, capitalized with $8.5 billion in federal funds,
which would “make and guarantee loans to older industries in need of
modernization and to innovative businesses having trouble getting
started.”24
Much more than money was at stake in this debate over industrial policy.
At issue was the country’s understanding of itself as a stronghold of freemarket, laissez-faire capitalism. Republicans couched their arguments in language calculated to strike fear into a nation historically suspicious of federal
power: did Americans really want more government meddling in industry
affairs? Did voters really believe that Washington bureaucrats should have
the power to determine the “proper” focus for the American economy? (In a
strangely self-defeating slap at industrial policy advocates, Republican congressman Dan Lundgren of California alleged that “Supporters of industrial
policy have never been able to demonstrate that the ‘best and the brightest’
are in Washington and . . . can do a better job [than is currently the case] of
making the economic decisions affecting our lives.”)25
266
THE MAN BEHIND THE MICROCHIP
Industrial policy advocates, on the other hand, claimed that laissezfaire ideals were hollow and that the United States had a de facto industrial
policy, administered largely by the Department of Defense.

But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism – which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object. (Keynes 1936: 159; emphasis added)
Though deregulation of the financial sector was far from the sole cause of the financial crisis that began in 2007, removing the fetters from the financial sector resulted in a crisis that was more extreme than it would have been had the previous regulations been kept in place.

pages: 578words: 168,350

Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies
by
Geoffrey West

The extension of the concept of the survival of the fittest to the social and political domain has led many thinkers to the controversial concept of Social Darwinism, whose roots go back to Malthus. Regardless of its validity, this idea has been sadly misrepresented, abused, and misused by politicians and social thinkers, sometimes with devastating consequences, to support all sorts of extreme views ranging from eugenics and racism to rampant laissez-faire capitalism.
The desire for more can apply to many things beyond wealth and material assets. It is a hugely powerful force in society that poses enormous moral, spiritual, and psychological challenges at both the individual and collective levels. The desire to succeed, whether in sports, business, or academia—to run the fastest, have the most creative company, or generate the most profound and insightful idea—has been a major underlying societal dynamic that has been instrumental in bringing us the extraordinary standard of living and quality of life many of us are privileged to enjoy.

Since man’s character is the product of his premises, I had to define and present the kinds of premises and values that create the character of an ideal man and motivate his actions; which means that I had to define and present a rational code of ethics. Since man acts among and deals with other men, I had to present the kind of social system that makes it possible for ideal men to exist and to function—a free, productive, rational system which demands and rewards the best in every man, and which is, obviously, laissez-faire capitalism.
“But neither politics nor ethics nor philosophy is an end in itself, neither in life nor in literature. Only Man is an end in himself.”
Are there any substantial changes I would want to make in The Fountainhead? No—and, therefore, I have left its text untouched. I want it to stand as it was written. But there is one minor error and one possibly misleading sentence which I should like to clarify, so I shall mention them here.

Back in 1818–19 there was an attempt to establish a General Union of Trades for British workers in all occupations. The name of the union was to be ‘The Philanthropic Hercules’––the strength of labour amalgamated into a powerful giant dedicated to doing good to one’s fellow man. In the course of the nineteenth century ‘philanthropy’ became a term more associated with the actions and charitable institutions of a middle class seeking to take the edge off the excesses of the laissez-faire capitalism that at the same time guaranteed the social position of that class. It is in this context that the word ‘philanthropy’ gains its pejorative overtones: in the old adage, the middle class will do anything for the working class except get off its back. Mugsborough’s Mayor and Liberal candidate, the 2 C. F. G. Masterman, From the Abyss (1911), 59.
Introduction
xxi
local draper Adam Sweater (owner of ‘The Cave’), poses as a philan- thropist of a familiar kind (‘no starving wretch had ever appealed to him in vain for a penny soup ticket’), yet it is the structural exploitation of working people practised every day by such as Sweater that lays the foundation for the very existence of those starving wretches.